Severance pay calculator
Estimates a payout from years of service and weeks of pay per year.
Multiplies weekly pay by the weeks of severance owed per year of service; an annual salary is divided by 52 first. The result is gross pay, and it reflects your agreement or company policy rather than any legal entitlement.
- Weeks of pay per year of service is a policy number you supply, not a rate set by law. Two weeks per year is a widespread practice with no statutory basis.E.g. 5 years at 2 weeks per year is 10 weeks. At $1,000 a week that comes to $10,000 before tax.
- An annual salary is converted at 52 weeks to get weekly pay.E.g. $78,000 a year is $1,500 a week. Eight years at 2 weeks per year is 16 weeks, so 1,500 × 16 = $24,000.
- There is no federal requirement to pay severance at all. The Department of Labor states that the FLSA contains no severance requirement and that severance is a matter of agreement between employer and employee.E.g. an employee laid off where no written severance policy exists may receive nothing, and that outcome is lawful under federal law.
- The WARN Act is often mistaken for a severance law. It obliges employers with 100 or more employees to give 60 days' notice of a mass layoff or plant closing.E.g. 60 days of pay after a missed notice is damages for failing to notify, not a statutory severance entitlement.
- Severance is taxable wages. In United States v. Quality Stores (2014) the Supreme Court held unanimously that severance is wages for FICA purposes.E.g. federal withholding on supplemental wages runs at a flat 22% up to $1 million paid in a calendar year, and 37% on the excess (IRS Publication 15).
- The number this calculator shows is gross, so the amount that reaches your account is smaller.E.g. a $10,000 estimate is reduced by federal withholding, Social Security and Medicare, and any state tax; severance can also delay unemployment benefits depending on the state.
- Severance pay
- A payment made on termination of employment. In the United States it arises from an employment contract, a severance agreement, or company policy. The Fair Labor Standards Act contains no severance provision, so there is no federal minimum.
- WARN Act
- The Worker Adjustment and Retraining Notification Act (29 U.S.C. §2101-2102) requires employers with 100 or more employees to give 60 days' advance notice of a mass layoff or plant closing. It is a notice law, not a severance law, and some states have their own mini-WARN statutes.
- Supplemental wages
- An IRS category covering pay outside regular wages, including severance and bonuses. Federal withholding is a flat 22% up to $1 million paid to an employee in a calendar year, and 37% on amounts above that (Publication 15).
- FICA
- Social Security and Medicare payroll taxes. Severance counts as wages for FICA, settled by the Supreme Court in United States v. Quality Stores, Inc., 572 U.S. 141 (2014), so these taxes come out of a severance payment.
- Weeks per year of service
- The multiplier most severance policies use: a set number of weeks of pay for each completed year. It is negotiated or set by policy, so read the figure off your agreement instead of assuming the common two weeks.
